MUPRHY'S LAW
7 February 2011
It was two ‘male’ broadcast executives Sam Chisholm and David Chance who in a desperate attempt to save Rupert Murdoch’s failing satellite tv service, Sky TV, in the early ‘90s took a somewhat jaded English football competition – the old First Division, and effectively turned it into the behemoth that has today become the English Premier League. At the same time, they made BSkyB the leading pay tv operator in the world. However, despite its success and enormous global attraction, the EPL and its partner BSkyB may be facing its greatest threat today – the cause - two women, Mrs Karen Murphy, an obviously redoubtable Portsmouth publican and Advocate General, Julianne Kokott of the European Court who have together just kicked the EPL into touch. Whilst Andy Gray and Richard Keys may or may not still believe that women do not understand the 'offside rule', the actions of these two women seem to have done more to blindside the EPL and BSkyB than the European Commission, ITV, Sentanta and a host of other challengers have achieved over the last 15 years.
What have they done!
The facts of the case are simple, the law is not. The rights to EPL matches are sold on a territorial exclusive basis throughout Europe. No surprise there. This partitioning of the European market has proved very lucrative for the EPL. As Sky pays the most, it also charges the most to its customers. Pubs in particular feel that they are over charged. Well as with anything where a differential pricing is charged, a black market or to use the satellite terminology a grey market has arisen. It is possible in Britain to buy the decoder cards of other European satellite operators at a fraction of the cost of buying the Sky service. In addition, because the Saturday afternoons are “closed off” (i.e., no live broadcast of the EPL is allowed for the 3pm games in the UK) to protect the 'gate', accessing a service from another European satellite operator, allows the purchaser of their service to get the Saturday afternoon games live.
Mrs Murphy bought access to the Greek satellite operator Nova. Sky and the EPL fought back and eventually Mrs Murphy was fined £8,000 for breach of copyright.
The story would normally have ended there but Mrs Murphy fought on and appealed. She raised a number of interesting and complicated questions of European copyright and competition law. For example, whether the importation of the Greek satellite tv decoders constituted an ‘illicit device’ under the terms of the relevant EU rules (the Conditional Access Directive) and whether her actions were permitted under the EU rules protecting the free movement of goods and services.
What Julianne Says?
AG Kokott believes Mrs Murphy is right. First, the importation of the Greek decoders is not illegal under the Conditional Access Directive. The AG also ruled that the relevant Copyright Directive did not provide an exclusive right which protects the reception of a satellite broadcast received at commercial premises such as Mrs Murphy’s pub where no entrance fee is charged.
But most importantly AG Kokott believes that the territorial exclusive broadcast rights to live football has the effect of partitioning the internal European market in a way which results in an unlawful interference with the freedom to provide services guaranteed under the EU law.
What does this mean?
At this stage nothing – Julianne’s opinion is non-binding and it is up to the European court to make up its mind. Naturally both sides are playing down the significance of AG Kokott’s opinion, as you would. The EPL says that the opinion does not stack up under EU law – they better hope this view is right. But there is no doubt that the EPL will be panicking. To use another football analogy – ‘goals change games’ and in the legal game so does the AG’s opinion. Some papers are saying EPL is 1 nil down. It is much worse than that. It is half time and the EPL are three down and this is now a hostile away game. Good luck boys – you are going to need it.
Wider picture?
Maybe not much will change if the ECJ follows the AG’s opinion. One estimate we have seen is that the loss to Sky is around £70m p.a. This is obviously containable but it looks conservative to us.
For a start AG Kokott has said that rights holders may no longer be able to sell rights on a territorial basis. There are a number of rights holders other than the EPL that will be looking anxiously at this opinion. We believe that the Hollywood Studios will breathe a huge sign of relief – we think they will be able to continue their current business practices with respect to selling the rights to their films. The opinion draws a distinction between partitioning the European market where the aim is to protect another form of exploitation of the right in question and partitioning the European market where the aim is to optimise exploitation of the same work at the same time within different territories in Europe. The studios parcel the rights to films up to protect different types of exploitation of the same film (video on demand, pay tv, free tv, etc) at a later time, whereas live sport is about it being ‘live’ – the action on the pitch is paramount.
Secondly, the studios have the advantage that language matters – a Greek dubbed or voice-over version of James Bond does not have much attraction to the average English viewer but the live Greek coverage of a match between Chelsea and Manchester United is a different matter – the commentary is a nice but not a must have – the pictures are everything.
What it means for the FAPL?
If the FAPL can no longer sell on a territorial exclusive basis, then this may have significant implications. The pent up demand to follow Mrs Murphy and watch the EPL in Greek may be greater than otherwise contemplated especially if the saving ran around £30 per household off the monthly Sky TV bill. If that happens Sky and ESPN will pay less the next time round for the rights. The EPL could decide to sell on a pan-European basis with a set price. But this defeats the purpose of the current collective selling by EPL clubs and territorial exclusivity. It must achieve less income for the EPL.
All EPL Clubs have high overheads but for example those at Chelsea and Manchester City are enormous. One solution may be for the Clubs to sell their own home games individually across Europe at a standard price for domestic consumers and commercial premises. The advantage to the Clubs is that they eat what they kill. It has the added advantage of being able to cross promote each Club ‘brand’ in a way that can’t be achieved today. Under this model, collective selling of the EPL would be confined to territories outside Europe.
Conclusion
Whatever happens, its going to be an exciting end to this EPL season. But with Gray and Keys gone, maybe it is time for Rupert Murdoch and Richard Scudamore to go for experience and call back Chisholm and Chance to solve this conundrum. But would it work? When those guys were in charge, there were no women running the line, let alone running the game. Perhaps it is best for Richard Scudamore just to start a campaign to kick the EU out of football. It could work.
